Esprit falls as Ying cuts stake

HONG Kong shares bounded higher on Friday, encouraged by steady US equity prices and optimism that the local economy is on the mend.

But clothing retailer Esprit failed to make it on to the gainers' board, falling a hefty HK$1.40, or 5.6%, to HK$23.80.

The deep drop for what has been one of the hottest blue-chip stocks this year was triggered by news that chairman and controlling shareholder Michael Ying had further reduced his stake.

The company said Ying had placed out 50m shares, equivalent to a 4.2% stake in the fast-growing firm.

The deal, which garnered Ying HK$1.2bn (£93m) before expenses, was done at HK$23.94 a share, a 5% discount to Esprit's close after yesterday's session.

After the sale Ying will retain the corporate reins at Esprit, with a reduced but still significant interest of close to 34% of the total equity, down from 38% beforehand.

This is the second time in the space of five months that Ying has cashed in some of his shares. In May, he off loaded 42.5m shares in a similar transaction and raked in HK$625m.

Esprit, which specialises in low-to-medium-end clothing, has raced up from about HK$13 in January. Thus far it has peaked at HK$26.55, about 10% down on Friday's price.

Investors have been enthused by the company's ability to increase sales and profits, especially in overseas markets. In addition, fans note that Esprit has been one of the indirect beneficiaries of the dollar's recent slide in value.

Esprit reports its earnings in Hong Kong dollars, which in effect are proxy US dollars because of the territory's currency board. But a substantial chunk of earnings comes in the form of ever more valuable euros. Its biggest market is Germany.

Most other Hong Kong blue-chips had a firmer tone amid hopes of an improving macro-economic environment, and no nasty surprises from key US jobs data due when Wall Street opens. Hang Seng Bank rose 25 cents or 0.3% to HK$97.25. It has now climbed close to HK$10 in little more than a month. Its parent, HSBC, rose 50 cents or 0.5% to HK$106.50. The Hang Seng index advanced 34.05 points to 11,580.17, up 0.3%.

Singapore shares were in buoyant mood on the positive story that fundamentals are still improving. Signs that factories were busier for the fourth month running in September helped the Straits Times index to 16-month peak, up 24.42 points or 1.5% at 1668.43.

State-linked Singapore Telecommunications (SingTel) rose three cents or 1.8% to S$1.71. It expects a nice paper profit on its holding in Belgian telco Belgacom when it lists next year. SingTel owns 12.2% of the group. With the economy expected to improve, banks firmed. DBS Group was up 40 cents, or 3%, to HK$13.70; United Overseas Bank 20 cents, or 1.5%, to S$13.60; and Oversea Chinese Banking Corporation 20 cents better at S$11.50, up 1.8%.

Japanese shares were still buoyed by the positive Tankan survey, although some profit-taking emerged.

Mizuho Financial, the bank, ran into a wall after a strong upwards run on hopes for better profits. It was level at 298,000 yen. The Nikkei 225 closed 115.76 points up at 10,709.29.